Twitter’s ad revenue growth falls short

Twitter’s ad revenue growth falls short of expectations

Retailers and other marketers didn’t spend as much as the social network anticipated.

Twitter Inc. generated $510 million in ad revenue in the first quarter, a 31% gain from the same period a year earlier. However, the social network’s overall revenue of $594.5 million was at the low end of Twitter’s expectations for the quarter.

“Brand spend didn’t grow as quickly as we expected,” said Adam Bain, Twitter’s chief operating officer, today during a conference call with analysts.

Even so, Twitter sees “a clear opportunity to increase our share of brand budgets over time. We have a strong product road map designed to tap into incremental brand-oriented online video budgets, and will deliver additional features for advertisers later this year—including more detailed demographic targeting and verification, and reach and frequency planning and purchasing,” Twitter wrote in a letter to shareholders.

To foster that growth Twitter recently rolled out a number of initiatives to improve customer service-related conversations between consumers and brands on its platform, as well as to appeal to marketers with a premium advertising offering called First View. The offering lets an advertiser ensure that, for 24 hours, consumers will see only that brand’s promoted tweets load on the first screen Twitter users see when they open the social network’s app or visit Twitter.com. Twitter last month also rolled out the universal website tag, a tool that lets retailers and other marketers track website conversions and manage multiple advertising campaignsAnd, most dramatically, Twitter in February introduced a new timeline that shows users the tweets its algorithm believes they are most likely to be interested in, rather than present the most recent tweets first. Consumers “love” the new timeline, as less than 2% of consumers have opted out of it, said CEO Jack Dorsey during the call.

To drive advertisers to spend more money on Twitter, the social network needs to add more features, Bain said. “These are features like demographic targeting and validation, [gross point rating, a measure of the size of an advertising campaign by  medium or schedule] and [target rating points, a measure of a video’s effectiveness], targeting and reporting. So, it’s a function of putting these features in place,” he said. “We believe that we can tap into incremental video budgets when we put those features in place.”

One bright spot for Twitter during the first quarter: It added 5 million monthly active users unlike in the fourth quarter when it failed to add any net new users.

For the first quarter ended March 31, Twitter reported:

  • $594.5 million in total revenue, up 36.4% from $435.9 million a year earlier. Excluding the impact of year-over-year changes in foreign exchange rates, revenue would have increased 39%, Twitter says.
  • $510 million in ad revenue, up 31.4% from $388 million.
  • Mobile advertising accounted for 88% of advertising revenue, or about $448.8 million.
  • 310 million monthly active users, up 2.6% from 302 million in the same period a year earlier, and up 1.6% from 305 million in the fourth quarter.
  • 257.3 million consumers, 83% of Twitter’s monthly active users, accessed Twitter from a mobile device.
  • $79.7 million net loss compared with a $162.4 million loss a year earlier.